America’s “jobless recovery” is a strange economic phenomenon: though businesses are returning to profitability, jobs are not trickling down to lift all economic boats. Though the causes and consequences of this economic conundrum are beyond the scope of a humble car blog, a snapshot of luxury/premium brand sales (via Truecar) show a similar dynamic at play in the world of car sales: luxury sales are recovering while year-to-date sales of mainstream standbys like Honda and Toyota are sitting flat (up 1.1% and 1.4% respectively). Of course the other dynamic at play in the first three quarters of 2010 is the recovery of domestic brands, but even among those successes, the luxury-premium brands are doing best (witness Cadillac sitting atop this chart, and Buick’s even faster recovery (up 57.5% YTD)). At least if you look at year-over-year percentage improvement rather than overall volume levels. Unlike past eras of economic and energy uncertainty, luxury cars, not spartan compact pickups and fuel efficient hatchbacks, are spurring recovery in the auto sector.
If I recall correctly, it was luxury brands that led the way out of the 1974-75 sales slump. Cadillac and Lincoln sales recovered first, followed by the rest of the industry.
After the economic downturn, the rich are still rich and the poor are still poor, it’s us suckers in the middle who once had some disposable income and job security but now have none. So the rich still buy their Jags and BMWs, the poor still panhandle on street corners, and the rest of us who were maybe thinking of buying a new Honda or VW are putting off that decision for a few more years.
A real workers’ paradise, for sure.
And yet it’s “class warfare” to ask that the wealthy pay a higher share of taxes.
Don’t worry, all that wealth will start trickling down on us any minute now!
The jobless recovery is not really such a big mystery – its all about falling demand, efficiency and a more international labor market. Most companies have made themselves profitable by downsizing to keep up with falling demand and doing more with less. So if they used to need 10 people to meet the demand of 100 widgets and the demand drops to 70 widgets they only need 7 people. However, they also got more efficient so they may only need 5 to produce 70 widgets and of those the outsourced 2 to cut costs. And there is your jobless recovery – profitable companies but no jobs. As demand recovers, the situation will improve but it won’t happen this or next year.
I am guessing this is the case because people with disposable income are spending it on high end cars. Middle class and lower class people are not buying cars because of the uncertainty out there in the market today. Hopefully the jobs start coming soon.
On Buick in particular, I think it is having much better products. The Enclave, LaCrosse and Regal are quite good and not much more expensive than mainstream cars. This is much better than the blue hair crap that used to be in the Buick show rooms. Now, Buick’s products are looking much better and Buick isn’t a blue hair brand anymore.
There’s not a more ridiculous purchase out there than a Cadillac/Government Motors luxury car. Seriously, there’s more useful and reliable stuff in SkyMall catalogs.
I can only think of one thing: The carpeted steps so someone’s over-fed, fat, lazy, never-exercised dog can heave its butt on the couch and sleep its life away!
Most recoveries since 1974 and certainly since 1980 have been jobless, or at least seen the creation of nonequivalent jobs. Income for most people is just not keeping up with GDP.
It’s nasty cycle: you recover, but with less real income. So you extend credit, cheapen goods (and, as a result, offshore more jobs) making you more vulnerable to the next correction. Eventually the economy either won’t recover, or will recover in a way that people won’t like.
All companies could take a lesson from Henry Ford:
http://www.ford.com/about-ford/heritage/milestones/5dollaraday/677-5-dollar-a-day
Henry Ford had reasoned that since it was now possible to build inexpensive cars in volume, more of them could be sold if employees could afford to buy them.
Without a prosperous middle class, most of these companies will suffer. Increasing profitability on the backs of your employees is a short-sighted strategy. R&D and better products are the only way to break the cycle of the race to the bottom.
-ted
Not at all surprising. The other factor not yet mentioned is that few people buy these cars, they lease them. So that when the lease is up, it’s up and a replacement is required. A “new” car for the lease crowd is just a new lease, with slightly higher or lower payments. Looking at the list, we see the brands that provide relatively more “value”, Acura, Infiniti, Audi, and Cadillac are at the top.
Every time corporations retrench and cut costs, those efficiencies are often permanent. Jobs come from economic growth, and growth is slow and is guaranteed to be slow in a system with more worker protections, guarantees etc. If you want jobs, we need to cut corporate taxes, reduce expensive regulations and create the right environment for growth. Currently, policies have run the exact opposite way.
Companies ARE doing better and do indeed have better bottom lines.
This the result of adjusting policy and losing weight.
BUT they do not, as any wise business planner wouldn’t, like to commit to any expanding or spending without knowing the near future.
People can praise Obama all they want, but business people, those that live in the real world and write checks, are afraid.
They are afraid what the healthcare bill will lead.
They are afraid of taxes and allowable investment spending write-offs.
So you wait.
You hold onto any big spending until you know what is going to be safe for at least ONE year, hopefully two, before you start spending.
And this means on hiring most of all.
The better off can still spend a few bucks on quality cars, but the middle class has no discrepancy income and needs to keep with the basics for right now.
That is what is left of the middle class.
> those that live in the real world and write checks, are afraid.
> They are afraid what the healthcare bill will lead.
I have a hard time believing international employers (GM, Ford, …) don’t look enviously at their European operations, where healthcare and pension benefits are handled through simple payroll deduction, rather than some long-term liability on productivity.
Of course, I didn’t notice any of them speaking up to encourage such a system domestically, so any such complaints would ring hollow. Either they like the complexity of managing benefits, or there are advantages in being a benefits provider – “captive” employees, less startup competition …
the rich get richer, the poor get poorer.
The only solution is the violent upheaval of the bourgeoisie and the return of land and the means of production to the working proletariat.
The definition of luxury has been defined upwards thanks to productivity improvements.
In a past era, vinyl seating, no AC, a mono AM one speaker radio and crank windows were normal for many buyers.
It is beyond the scope of Ben Bernanke as well…All he knows to do is rip everyone off via inflation.
The taxtakers and banksters are doing well…They always do. This should not come as any surprise.
The taxpayers (aka, Slaves) are being destroyed by taxes and inflation and can’t afford $20K cars.
Careful with playful numbers. Companies taking on a ton of deep debt “just in case” suddenly show a much stronger cash position. Companies dumping employees suddenly reduce their expenses mightily rendering a pretty hot bottom line. Nightly MSNBC reports show how revenue of this or that company ‘beat estimates,’ as though ‘estimates’ were any measure of profitabilty.
With few exceptions, this accounts for most of the ‘businesses returning to profitiability.”
Welcome to the legacy of supply side idiocy.
Demand? We don’t need no stinking demand! Why as soon as corporations and the rich have money they will go running around and hire lots of people and the economy will boom.
Trust us.
My opinion is worthless and seems to mainly create anger in others so I pass the torch on to others.
All I ask is that all USA citizens OBEY.
And that my bought-every-once-in-awhile lottery ticket is a multi-million dollar winner allowing the discretionary income to frivolously put some wealth into circulation by purchasing an already-restored 1969 2-door Dodge Dart with a small V8 or an early 70s Plymouth Duster with a small V8.
Just a basic old Mopar to drive in the July 4th parade and the occasional drive in the country.
Obey your betters. It is the “patriotic” thing to do.
Let’s see now:
Fleetofwheel: Yeah, 40 years ago, that AM, one-speaker radio cost you $74.00 for the privilege, too!
Ronin: Of course, and when companies set sales “budgets” and don’t meet them, they claim they are losing money, when the so-called “budget” is nothing more than a made-up number to start with.
obbop: You ain’t going nowhere! Who disagrees with you? One guy? Big deal. I throw out sound bites, you toss out stuff that makes one scratch their head and say “what?” and then try to decipher your words! PRICELESS!
TTAC has great commentors.